CFTC Sues Binance, CEO for Illegal Derivatives Exchange: “Numerous Violations”

Case Against Cryptocurrency Exchange Filed by CFTC Binance and its Chief Executive Officer
A complaint against cryptocurrency exchange Binance and its CEO, Changpeng Zhao, has been filed by the Commodity Futures Trading Commission (CFTC) for “numerous violations associated with the Commodity Exchange Act (CEA) and CFTC laws.” Binance was also charged by the US futures market authority for operating an unauthorised exchange of electronic asset types. The regulator claims that by processing some sorts of deals without being subscribed, Binance functioned as “a designated agreement marketplace or swap execution facility.”
According to the watchdog, Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance (Solutions) Holdings Limited were also charged. Zhao reportedly put these businesses in place to run the trading platform through “an intentionally opaque common enterprise.”
Since at least 2021, when insiders told Bloomberg that the kinds regulator was looking into the large cryptocurrency exchange to determine if it was enabling US citizens to trade types without registering, the CFTC has been investigating Binance.
The CFTC said in the complaint that starting in July 2019, Binance gave US consumers advice on how to get around its compliance settings, even though it had previously allegedly prohibited them from trading on its platform. According to the CFTC, this tactic was specifically intended for the exchange’s “commercially important US-based VIP customers.”
Furthermore, Binance did not confirm the identity of its consumers for a sizable portion of the time starting in July 2019. Furthermore, the exchange was found to have “failed to use standard compliance processes designed to prevent and detect money laundering and terrorist financing.”
In its lawsuit, the CFTC also charged Binance with ordering staff members to use a messaging programme that immediately ends conversations in order to discuss control evasion with US-based clients. The CFTC claimed that this was done to hide any indication that the exchange was making an effort to keep its users in the US.
Gretchen Lowe, Chief Deputy Director and Chief Counsel of the CFTC’s Enforcement Division, stated that the basis of the Commission’s complaint against Binance is the defendants’ alleged deliberate avoidance of U.S. law.
“The emails and chats between the defendants themselves demonstrate that Binance’s attempts to comply with the law were fraudulent, and Binance consistently chose to prioritise profits over obeying the law,” Lowe continued.
Former Chief Compliance Officer (CCO) of Binance Samuel Lim is accused by the CFTC of encouraging and abetting violations by the cryptocurrency exchange between 2018 and 2022. According to the regulator, the former CCO engaged in actions aimed at assisting customers in getting around Binance’s compliance policies. To circumvent Binance’s IP address-based restrictions, Lim, for instance, advocated for a policy that directed US customers of Binance to “access the trading platform through a virtual private network to bypass Binance’s KYC-based restrictions” or “create ‘new’ accounts through offshore shell companies,” according to the CFTC.
In an effort to both avoid compliance and keep the money coming in, Binance worked hard for years despite knowing they were infringing CFTC regulations. CFTC Chairman Rostin Behnam stated, “This is a warning to everyone in the digital asset world that the CFTC will not tolerate willful avoidance of U.S. law.”

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